Year-end rush: Market recovery from recent lows sets IPO Street abuzz again

After a brief lull, the initial public offering (IPO) market is buzzing again with markets recovering from recent lows.

 

On Friday, three firms — Vishal Mega Mart, Sai Life Sciences, and One MobiKwik Systems — announced plans to raise a combined Rs 11,615 crore via IPOs.  Several other companies, including International Gemological Institute and Avanse Financial Services, are expected to follow suit.

 

The surge in IPO activity comes after a slowdown triggered by poor listings, weak demand, foreign portfolio investor (FPI) outflows, and earnings disappointments. However, with the Nifty 50 index and Nifty Smallcap 100 rebounding 6 per cent and 

9 per cent, respectively, from their November lows, the primary market is once again vibrant. 

 

 

The latest round of IPOs will further boost the tally for the year. During the first 11 months of 2024, 76 firms raised Rs 1.34 trillion, surpassing the 2021’s record tally of Rs 1.19 trillion.

 

Bankers say the recent market selloff made it challenging to price and execute deals, but the Maharashtra Assembly election results sparked a dramatic market revival. Despite the selloff, fundraising remained robust during the two-month downturn, largely due to three large deals. 

 

However, bankers said most transactions lacked broad participation, while some merely scraping through.

 

Bankers said the rush to close IPO deals is triggered by a revival in FPI flows. Also, the last 10 days of a month is generally avoided due to concerns over lack of FPI participation.

 

“The sell-off did impact subscription numbers,” said Deepak Kaushik, EVP and group head of ECM at SBI Capital Markets. “While recent IPOs have not seen double-digit subscriptions, demand from long-term investors remains intact. Additionally, there is decent demand from FPIs for upcoming issues,” he said.

 

Between October and November, 14 companies raised nearly Rs 70,000 crore, despite modest subscription levels for marquee IPOs, such as Hyundai Motor India, Swiggy, and NTPC Green Energy, which garnered less than three times subscription.

 

Ajay Garg, managing director of Equirus, said that IPO fortunes were tied to the secondary market, which has seen a decent revival and improved participation after the state election results.